Mum needs help in retirement

[Aaron Sice]

you could get an LOC on the remaining equity to pay the mortgage while mum lives rent free....?

no one will 100% win in this situation - but everyone does at the same time.....weird.

so many internal conflicts - but then you remember - it's mum

 

[Rooster]

Never though of that.

So if the house went up for Auction, and the only bid she got was 450k, and she was happy to take it, it can not be sold?

Cheers

Mick

I'm sure it would be sold. But if it was sold to a family member, I'd assume that it would have to be disclosed and would be subject to an independent valuation.

Usually that question will be asked in correspondence with your conveyancer prior to settlement.


Rooster

 

[MCS_80]

you could get an LOC on the remaining equity to pay the mortgage while mum lives rent free....?

Ding, ding !!!!

Not a bad idea. Has anyone out there done anything similar to this?

Cheers

Mick

 

[MCS_80]

I'm sure it would be sold. But if it was sold to a family member, I'd assume that it would have to be disclosed and would be subject to an independent valuation.

Usually that question will be asked in correspondence with your conveyancer prior to settlement.


Rooster

Oh, I forgot to mention also.

My Fiancé and I recently purchased a house from her Untie for 50k less than what the Bank valued it at. Im not sure if there is a limit on how cheap houses can be sold to family for, we got 50k off ours.

All went through without a question asked. We had a broker take care of it all for us. The house is our PPOR also. We have no IP's yet.

The house is only in my Fiancés name.

Cheers

Mick

 

[bene313]

I'm pretty sure the sale of property to family/relatives is subject to an independant valuation in order to stop the loop holes regarding stamp duty and CGT.

Actually, this would be beneficial. The transfer of the property would be deemed at market value 850k even though the actual cash paid by the son would be 400k.

1. Stamp duty due on 850k

However...

2. Deemed sale by Mum at 850k - but she lives there so no CGT.
3. Son's cost base for CGT 850k (but paid 400k)

Bonus!

disclaimer: this is not advice

 

[marg4000]

I think the idea of selling a person's home to another at a reduced price needs very careful consideration.

Yes, it is to family.
Yes, she will get cheap (or no) rent

BUT

For many retirees their home is their major asset. There are many things that can go wrong with the above scenario, even if there are no siblings to dispute a "cheap" property transfer.

i.e.

Future relationship breakdowns where assets are divided
Bad financial decisions mean all assets have to be liquidated
Future family quarrels or disputes mean parents evicted - yes, we have all seen it on TV.

Leave mum's home alone for as long as possible.

AND better check with Centrelink. There are rules about "deprived assets". You will find that the $400K price reduction will be treated as a deprived asset and your mum's pension will be reduced as Centrelink will treat the interest that should have been earned on the $400K as income even though your mum is not receiving it. This continues for 5 years after the event.

If you do proceed down this path I would suggest good independent legal advice for your mother so that she fully understands what she is doing before it is too late to change action should the ramifications be too detrimental.
Marg

 

[MCS_80]

^^^^^^

Great advice Marg

Maybe a similar contract to a "pre Nup" could be the ay to go?

Sorry for high jacking the thread skater.

Cheers

Mick

 

[Aaron Sice]

wow - deprived asset - centrelink really do have all bases covered.

unless you're a crack addict popping out kids.

 

[jingo]

investment properties are LONG term investments when you have very strong cashflows elsewhere.

it is a harsh reality but I would suggest your Mum is

(a) living beyond her means, or

(b) retired too early.

I agree with the general sentiment to date - the last thing this lady need is some whinging tenant that won't pay their meagre contribution to the mortgages and maintenance and holding costs

Have a gentle chat to her about finding some part time work??

I agree Ausprop. I'm not sure how someone can realistically expect to be abe to 'retire' on the pension, have very limited superannuation and still have a debt of $200,000 against their PPOR?

If the lady really wants to retire, I'd suggest selling the PPOR, downsizing to a truly affordable PPOR (ie one that can be fully paid off) and invest the proceeds into shares or cash to generate further income and make her life more enjoyable.

 

[skater]

Sorry for high jacking the thread skater.

I'ts not my thread.

 

[MCS_80]

I'ts not my thread.

Hahaha.....

Sorry. Dean75...

Cheers

Mick

 

[Perp]

She has quite a bit of superannuation up her sleeve

Surely you jest, marg? She has $100K - total. My thoughts were more along the lines of Ausprop and jingo's:

it is a harsh reality but I would suggest your Mum is

(a) living beyond her means, or

(b) retired too early.

I agree Ausprop. I'm not sure how someone can realistically expect to be abe to 'retire' on the pension, have very limited superannuation and still have a debt of $200,000 against their PPOR?

If the lady really wants to retire, I'd suggest selling the PPOR, downsizing to a truly affordable PPOR (ie one that can be fully paid off) and invest the proceeds into shares or cash to generate further income and make her life more enjoyable.

AND better check with Centrelink. There are rules about "deprived assets". You will find that the $400K price reduction will be treated as a deprived asset and your mum's pension will be reduced as Centrelink will treat the interest that should have been earned on the $400K as income even though your mum is not receiving it. This continues for 5 years after the event.

This was my first concern, too - definitely a potential fatal hiccup to the plan.

 

[Aaron Sice]

ah that's so funny - the thread was hijacked not once but twice.

 

[lizzie]

Surely you jest, marg? She has $100K - total.

my thoughts exactly. currently we have around $600k in super, planning on retiring with no ppor debt and know that that is still not enough as would only give us $30-60k a year to live on for the two of us - what happens when we need a new car, what happens if we want to do some travelling, what happens if there are unforseen medical problems (even with insurance) .... hence we are building the ip portfolio while we can.

marg, you've had some good advice here. take it away and digest - but i definately wouldn't be getting your mother into any further debt. the ship has already sailed for her.

basically, the debt is what is going to bring her undone.

 

[marg4000]

Quote:
Originally Posted by marg4000
She has quite a bit of superannuation up her sleeve

Surely you jest, marg? She has $100K - total.

I was talking about FOR NOW. I don't think it is necessary to rush into a decision to dispose of her home at this stage.
Marg

 

[The Y-man]

marg, you've had some good advice here..

Didn't think Marg was the one asking for advice?

Cheers,

The Y-man

 

[Sunfish]

i definately wouldn't be getting your mother into any further debt. the ship has already sailed for her.

That's what I was trying to say Lizzie but you said it better.

FWIW the "advice" given on this thread has been excellent. Well done.

 

[Kath Russell]

Plan to Plan!

I'd suggest Mum writes down her objectives, what she wants out of life now she's retired, figure out what it's going to cost to live T H E N look at how to make the property work for her. Got a budget? Does she know what it costs her to live each month? Is that super working for her? Where is it invested?

Personally, I'd either buy the property off her if you had the opportunity (but my family is very different to most I'm finding....) or encourage her to live off the equity (yes debt), organise her life insurances, health etc and make a plan that's adjusted to suit her new life.

Get a plan, take it to a good tax accountant / financial planner who's actually experienced in this subject, not just crunching numbers and go from there. Get a few scenarios, look into it then sort it out.

You're never too old to invest either I reckon. "We don't stop playing because we grow old; we grow old because we stop playing". George Bernard Shaw

.........but that's just me

 

[natmarie73]

Dean75 how old is mum?

I think her age would have a big impact on what strategies are proposed. If she has recently retired at 55 she has a lot more years to fund than if she has recently retired at 70. She is also a lot more likely to want and get part-time work, not to mention health issues etc etc.

Do you know how much she wants/needs each week? Maybe she is happy with her situation as it is.

 

[dean75]

Wow some good advice there guys, thanks for everyone involved.
I like the idea of buying the property of mum at a discounted price. But say it's worth 850k and I buy it at 400k with an interist rate of 6%, that's 24k ive got to come up with. No chance.
If the answer to that is "use the equity or capital growth to pay it". Well I might as well tell her to do that and save the hassle.
I was also thinking of getting her to sell, combine our money, I buy a house with land and build her a nice granny flat out the back with the money she would contribute. That way she can still stay in the area, be close to family and have plenty of money in her pocket.
Thoughts